RBI governor Raghuram Rajan says the Indian economy, which has been described as “one bright spot” in a world of stagnant growth, is like a one-eyed king in the land of the blind.
Much has happened but Rajan told TheWall Street Journal, “we’ve still to get to a place where we feel satisfied. We have this saying, ‘in the land of the blind, the one-eyed man is king’.”
“We’re a little bit that way,” he added.
Rajan, who is in Washington with finance minister Arun Jaitley for the annual spring meetings of the World Bank group, was perhaps being modest because he didn’t have much to complain about.
“We feel things are turning to the point where we could achieve what we believe is our medium-run growth potential. Because things are falling into place. Investment is starting to pick up strongly. We have a fair degree of macro-stability. Of course, not immune to every shock, but immune to a fair number of shocks.”
That all sounded good. And the governor, who enjoys rock star celebrity in India and in some quarters in the US for correctly predicting the 2008 financial crisis, went on to list the signs of things “falling into place”.
“The current account deficit (the difference in the value of goods and services a country imports and exports) is around 1%. The fiscal deficit (gap between government’s expenditure and earning) has come down and continues to come down and the government is firm on a consolidation path. Inflation has come down from 11% to less than 5% now. And interest rates therefore can also come down. We have an inflation-targeting framework in place.”
He added, “So a bunch of good things have happened.”
What is he worried about? Not much, it turned out. He said “structural reforms (a complex set of changes defined simply by The Economist as the way the government works)”, the goods and services tax is coming and, he added, “there is a lot of exciting stuff which is already happening”.
He mentioned the mobile-to-mobile transfer of money from one bank account to another, which he said was the first of its kind in the world.
Rajan’s term ends in September. When asked if he is likely to get an extension, he said, “It is a question that has to be answered.”